It’s best to set in stone some core financial principles sooner rather than later. Here are some fundamental truths you should always keep in mind.
1. You should pay God first.
Where your treasure is, there your heart will be also (Matthew 6:21). It’s important to understand that money shouldn’t be the sole reason behind why we work each day. Our hope doesn’t lie in the dollar, euro, or gold; it’s founded in Christ.
Personal finance is no different. When we acknowledge our dependence on Christ, we can start to see how faithful God really is. This is why giving is so important. We give so that others might hear the Gospel and find the same hope that we have.
2. You should pay yourself second.
You may have heard of the 10-10-80 principle: Pay God 10%, pay yourself 10%, and pay the bills with 80%. For some, that may seem impossible in your current financial situation.
There’s no magic way to suddenly change your financial picture so that you can use 80% of your income to pay bills and give/save the other 20%. The reality is that it’s easiest when you implement this practice early and make it a priority.
But regardless of your current situation, ask God to help you get there and He will.
3. Roth IRAs are awesome.
Saving for your retirement years doesn’t need to be complicated. Putting money aside in a Roth IRA can mean huge tax savings for you in the future.
Remember, the contributions you make into a Roth IRA have already been taxed, so both the earnings and principal within the IRA will be distributed tax-free.
4. Take the match!
If you aren’t taking advantage of your employer’s 401(k) match, you’re leaving free money on the table. You cannot afford to NOT take the match, so always be sure to contribute as much to a 401(k) or 403(b) that will qualify you for any company match.
5. Build an emergency fund.
Having 3-6 months of expenses in an emergency fund is an excellent goal for someone who has already created a baby emergency fund of $1,000. If you have to tap into your emergency fund, make it a habit to refill the emergency fund as soon as possible!
6. Make a budget that works for you.
It will take a little time to work and rework your budget. In fact, I often find that it takes about 3 months of adjusting before you will get it right. Be patient. It is a challenge at first, but once you get it dialed in, it really helps!
7. Spend less than you make.
Sounds too simple, but it’s true. It goes hand in hand with creating a budget and should be a no-brainer. Unfortunately, credit card debt is still a problem in America today, which tells me that we’re living on borrowed money.
8. Eliminate debt with fury.
The borrower is slave to the lender. Do all that you can to pay down debt as fast as you can. Put every spare dollar towards debt and you’ll soon realize the freedom that comes with being debt free.
9. Invest wisely.
Don’t invest in something that you don’t understand. And work to stay diversified with your investments (i.e. don’t invest all your money in a single stock). If you are thinking of the investment as a get-rich-quick scheme, you should avoid it and think long-term instead.
10. Use insurance properly.
Whether you’re looking for car insurance or finding rates for term life insurance, be sure that you don’t compromise your coverage for the monthly premium. Also, it’s always wise to do your research before signing the contract with an insurance company as there are often many caveats and fine print that can be overlooked if you aren’t careful.
11. An investment should increase in value.
Unfortunately, I’ve heard people say that cars, clothes, and electronics are to be called investments. Unless you’re buying a very rare car or a collectible, these items are simply expenses. A real investment will increase in value and provide a return for your investment.
12. Side income is achievable.
You can make money with your passion. With a little creativity and a lot of persistence, there’s no reason why you shouldn’t have opportunities to make as little as $50 each month to $500 or more by doing what you love on the side. (also check out these legit home based business ideas)
13. Keep impulsive behavior out of your purchases.
This can be a challenge, especially with the holidays coming soon.
One of the best pieces of advice that I’ve ever heard regarding impulse spending was to create a 30-day rule. Before you buy something on impulse, make it a point to wait 30 days before you buy. If you’re still passionate about buying it, give it some serious thought. If you’re over it, you’ve just successfully saved yourself some money!
14. Enjoy your money.
There’s a careful balance that you need to keep as you become better at managing your personal finances. If you don’t leave room for enjoyment, you’ll soon become a slave to your budget and feel overwhelmed and trapped by it.
Make it a point to have a little fun money each month and reward yourself (within reason) for a job well done.
15. Generosity is contagious.
All our resources are from God and we can use our finances to spread the Gospel.
Outside of giving to your church or to missions, you can practice generosity in the smallest of areas. Sometimes small things like paying for a friend’s coffee, buying lunch for someone, or buying some school supplies for a teacher in need can speak volumes!
Below is a recent video we did about how to be more generous – check it out!
What are some other fundamental truths of personal finance you’d like to share? Leave a comment!